How to save tax for working professionals in Singapore

 Working professionals in Singapore can employ various strategies to optimize their tax situation. Here are some practical tips to help save on taxes:

1. Contribute to CPF (Central Provident Fund):

   • Maximize your CPF contributions, as both employee and employer contributions receive tax relief. This not only helps with retirement savings but also reduces your taxable income.
   • The maximum contribution is capped at $37,740 which is about $20,400 contribution max for working professionals. This is capped at salary of $102,000 per year.
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2. Supplementary Retirement Scheme (SRS) Contributions:

   • Consider contributing to the SRS, which provides additional tax relief. The contributions are subject to a cap, and the funds can be invested for potential returns. Currently the cap is $15,300 per year whereby you can tax relief. The drawback is you can only draw the money without any tax when you reach 63 years old. Once you reach 63 years old and draw the money out from your SRS account, only half of the amount are being taxed. Currently the first $40,000 you withdraw from SRS is not subjected to any tax. Take note though once you start drawing out from SRS account, you need to draw out all the money within 10 years time. Meaning if you draw out in year 2032, you have till 2041 to complete drawing all your money from SRS.
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3. Claim Personal Reliefs:

   • Take advantage of personal income tax reliefs, such as the Earned Income Relief, Course Fees Relief, Parent Relief, and Handicapped Parent Relief. Evaluate your eligibility for each and claim accordingly. My Mum stays with me and she is not working. I gain additional relief.
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4. Utilize Parenthood Tax Rebate:

   • If you have children, benefit from the Parenthood Tax Rebate, which offers tax relief for each child. This can significantly reduce your overall tax liability.
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5. Donations and Philanthropy:

6. • Make charitable donations to approved institutions to claim tax deductions. This not only benefits the community but also provides tax relief for the donor. You can enjoy 2.5 times for every dollar of donations. Meaning for $100 donations, you receive $250 tax relief.
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7. SkillsFuture Credit:

• Utilize SkillsFuture Credit to enhance your skills. While it doesn't directly save on taxes, it can contribute to your professional development, potentially leading to increased income. There is cap though $2,500 per year for courses taken which you need to keep the receipt.
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9. Tax Relief Example :

10. The max tax relief is capped at $80,000 per year in Singapore excluding the donations. Take for example a household of 5 people, grand parent, parents and 2 children. Reliefs that the parent can enjoy assuming only 1 working parent.

Salary CPF contributions : $20,400 (Doing it in total by 31st Dec 2024)

Medisave contributions : $3,000 to $4,000 (Doing it by 1st Jan 2024 and whenever any deduction of medisave from medishield life or insurance)

Special account or RA account contribution : Capped at $8,000 per account if FRS is not or RA is not met (By 31st Dec 2024)

SRS contribution : $15,300 (By 31st Dec 2024)

Child care relief : $4,000 per child if child is under 16 years old

Parent relief : $9,000 per parent if parent is not working

Earned income relief : $1,000 (Age 55 and below)

NS man relief : $1,500

Donations : $400 ($13 contribution per month)

Total reliefs will be around $70k+

Depending on the income earned, the tax bracket for the 1st $40k payable is $550 and the next $40k is @ 7% which is $2,800. If the professional is getting an annual income of $150k, the tax that professional will be paying will be $3,350, without the reliefs, will be paying up to $10k+